Victoria wants to talk carbon tax, GST at Canberra summit

Michelle Grattan

THE Victorian government says distribution of the GST and the impact of the carbon tax are major influences on state budgets that should be included in the debate about tax reform.

Ahead of the tax summit, starting tomorrow, a spokeswoman for state Treasurer Kim Wells attacked the Gillard government for refusing to bring forward the completion of the review of GST distribution between states and for declining to negotiate with Victoria on the design of the carbon tax.

The impact of a carbon tax should be included in debate on tax reform.

Treasurer Wayne Swan yesterday targeted inefficient state taxes, saying stamp duty on property transactions made it more costly for people to relocate for work or change houses as their family needs changed.

Calling on the states to ''step up to the plate'' in improving Australia's tax system, Mr Swan warned that they ''can't just expect the Commonwealth to stump up the cash to bankroll their reforms''. The federal government was already providing them with big funding increases in health and education, and their GST revenue had doubled in the past decade, to an estimated $48 billion this year.

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Some of the most inefficient taxes were those levied by the states, Mr Swan said in his weekly economic note, also pointing to insurance and payroll taxes.

Mr Wells's spokeswoman said significant reform of state taxes, including inefficient taxes such as stamp duties, would require ''substantial replacement revenue''. ''Victoria would have reservations about any replacement that uses the current unfair and fundamentally flawed GST relativities or that would increase Commonwealth control of state revenue and reduce state budget certainty,'' she said.

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Victoria supported removing inefficient state taxes such as stamp duties and insurance-based taxes - it was cutting stamp duty for first home buyers by 50 per cent, and replacing the present inequitable insurance-based fire services levy with a property based levy.

Mr Swan continued to lower expectations for the forum, saying it wasn't about reaching ''some kind of grand bargain'' or reinventing the tax system overnight. ''It's about the government listening, not talking.''

The Treasurer intends to outline government priorities on tax soon after the summit. The government says it is interested in reforms to help businesses squeezed by the two-speed economy. But government sources warned against expecting instant policy announcements, saying such assistance would cost money that would have to be found.

Mr Swan defended ruling out changes to the GST and the planned mining tax.

''No topics have been banned from discussion. Nothing is taboo. Participants that mention the mining tax or the GST won't have their microphones cut off or be thrown out by bouncers. [But] it's just common sense that the government isn't going to hit the reset button on policies that we've already consulted on extensively.''

The ACTU has called for a higher rate of tax on the very wealthy as part of a crackdown on tax loopholes, breaks, evasion and avoidance - which it says are costing at least $50 billion a year. Very high income earners should pay at least the same average rate of tax as middle income households, unions will tell the summit. ACTU secretary Jeff Lawrence said the present system offered incentives and avenues for the wealthy to cut their tax, so they ended up paying less-than-average rates.